Large Cap Investing: How equal-weighting could give your portfolio a boost!

In markets led by a few large companies, the performance of a market-cap weighted index may be influenced by those select constituents. Rising stock price of a constituent leads to higher market capitalization, which in turn leads to it having a higher weightage in a market-cap weighted index. This approach may lead to market-cap bias owing to which the index may not be able to capture the India growth story in its entirety.

Equal weighting, on the other hand, offers the opportunity to capitalize on broad based economic growth and market performance. This allows investors to participate in the India growth story without market-cap bias, whereby each stock can have equal influence on the performance of the index.

In an equal-weighted portfolio, every stock is weighted equally, irrespective of its market capitalization, potentially reducing stock and sector concentration risk. Periodic rebalancing ensures that weights are reset to equal.

Comparison between Market-Cap Weighted Indices and Equally Weighted Indices

Equal weighting can lead to better stock level diversification

Companies with relatively large (small) weights in the parent market-cap index have lower (higher) weights in the equal weighted version, as can be observed from the table below. For example, HDFC Bank’s weight is ~2% in the Nifty50 Equal Weight Index, significantly lesser than its 12.7% weight in the Nifty 50 Index. Similarly, Adani Enterprises Ltd. has a weight of 0.5% in the Nifty 50 Index, but has a larger weight of 2% in the Nifty50 Equal Weight Index.

Along with helping reduce potential stock concentration risk, the Nifty50 Equal Weight Index also helps reduce potential sector concentration risk with its top 3 sectors accounting for 42.1% of the index weightage compared to 57.4% for the Nifty 50 Index. The Nifty50 Equal Weight Index is overweight Healthcare, Metals & Mining and Autos and underweight Financial Services and Oil & Gas relative to the Nifty 50 Index.

The Nifty50 Equal Weight TRI has outperformed the Nifty 50 TRI over short and long-term horizons

For example, over the 5-year ending December 2025, the CAGR was 19.5% for Nifty50 Equal Weight TRI and 14.7% for Nifty 50 TRI.

Views expressed herein as on Jan 10, 2026 involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein. Stocks/Sectors referred are illustrative and should not be construed as an investment advice or a research report or a recommendation by HDFC Mutual Fund (“the Fund”) / HDFC AMC to buy or sell the stock or any other security covered under the respective sector/s. The Fund may or may not have any present or future positions in these sectors. HDFC Mutual Fund/ HDFC AMC is not indicating or guaranteeing returns on any investments. Readers should seek professional advice before taking any investment related decisions.

Index and Commodities Performance Tracker

(% returns, as at 31 December, 2025)

Riskometer as on December 31, 2025. #For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com

Riskometer as on December 31, 2025. #For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com §Name changed from HDFC Developed World Equity Passive FOF w.e.f.August 30, 2025.

πInvestors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Fund scheme makes investment (subject to regulatory limits).

NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products.

BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSE Limited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

MSCI Disclaimer: HDFC Developed World Overseas Equity Passive FOF is not sponsored, endorsed, sold or promoted by MSCI. All MSCI indexes are owned by MSCI and provided as-is without any warranties. MSCI assumes no liability for or in connection with the MSCI indexes. Please refer the Scheme Information Document for complete disclaimer.

CRISIL Disclaimer and Copyright Notice: “© CRISIL Limited. All Rights Reserved Each CRISIL Index (including, for the avoidance of doubt, its values and constituents) is the sole property of CRISIL Limited (CRISIL). No CRISIL Index may be copied, retransmitted or redistributed in any manner. While CRISIL uses reasonable care in computing the CRISIL Indices and bases its calculation on data that it considers reliable, CRISIL does not warrant that any CRISIL Index is error-free, complete, adequate or without faults. Anyone accessing and/or using any part of the CRISIL Indices does so subject to the condition that: (a) CRISIL is not responsible for any errors, omissions or faults with respect to any CRISIL Index or for the results obtained from the use of any CRISIL Index; (b) CRISIL does not accept any liability (and expressly excludes all liability) arising from or relating to their use of any part of CRISIL Indices.

The views are based on internal data, publicly available information and other sources believed to be reliable. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Stocks/Sectors referred are illustrative and not recommended by HDFC Mutual Fund (“the Fund”)/ HDFC AMC. The Schemes of the Fund may or may not have any present or future positions in these sectors. It should not be construed as an investment advice or a research report or a recommendation by the Fund/HDFC AMC to buy or sell the stock or any other security covered under the respective sector/s. The Fund/ HDFCAMC is not guaranteeing any returns on investments made in the Scheme(s). Past performance may or may not be sustained in future and is not a guarantee of any future returns. HDFC Asset Management Company Limited (“HDFC AMC”) does not warrant the completeness or accuracy of the information herein. Neither HDFC AMC, nor any person connected with it, accepts any liability arising from the use of this material. The recipient(s) should before taking any decision, should make their own investigation and seek appropriate professional advice.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.